Three Methods that Could be Adopted for Marketing Shares / Services

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There are basically three methods that could be adopted for marketing shares/ services. These are:

1. Private subscription

2. Right issues

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3. Public issues

Private subscription envisages private sale of securities. The promoters subscribe to the shares themselves or request their relations/friends to associate with them, i.e. there is an attempt to affect collection of savings directly from the saving surplus units without the intermediation of financial institutions. This is known as direct financing.

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Right issues to raise capital can be employed by existing companies. Whenever the capital of an existing company is to be increased it should offer right issues to the existing shareholders, unless they themselves decide otherwise.

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When a company is new and has to raise huge funds which cannot be done by the previous two methods, it has to go in for public issue. Companies have also gone for public issue so as to get their shares listed in a stock exchange.

The issue of capital to the public involves a number of steps, starting from obtaining consents from SEBI to opening/closing of subscription lists. Consequently, managing the issue becomes a specialised job, for which a number of concerns like underwriters, brokers, issue-houses etc. have sprung up in the issue market rendering this type of financing to be an indirect one. The flow of savings from the savers is diverted through intermediary financial institutions to the entrepreneurs.